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Transferring a Land Charge During Mortgage Refinancing: A Simple Guide
When you decide to refinance your mortgage, one of the key steps involves transferring the land charge (mortgage security) from your current bank to the new lender. Here's a step-by-step breakdown of the process:
- Applying for a New Mortgage Loan You apply for a new mortgage loan with your chosen bank, which will replace your existing mortgage.
- Property Appraisal The new lender orders a property appraisal to assess the current market value and ensure the property's value supports the new loan amount.
- Title and Legal Review A title search and legal checks are conducted to confirm the property's ownership status and check for any liens or encumbrances. This is necessary to transfer the land charge properly.
- Preparation of New Mortgage Documents The new lender prepares mortgage documents, including a new charge (land charge) on the property in their favour. This replaces the previous charge held by the original bank.
- Settlement and Payoff of Old Mortgage Upon closing, the proceeds of the new loan are used to fully pay off the existing mortgage with the original bank. This effectively discharges the old land charge.
- Discharge of Old Land Charge The original bank or mortgage lender records a charge discharge (or release) at the land registry, officially removing their security interest in the property.
- Registration of New Land Charge The new lender registers their land charge against the property at the land registry, making their mortgage interest official and enforceable.
- Notification and Documentation The borrower is notified of the changes. Any additional documents such as a Quit Claim Deed in divorce situations may also be executed to clear previous ownership interests if needed.
This process ensures that the land charge—or mortgage security—is transferred from the original bank to the new bank as part of the refinancing. Throughout, the legal title of the property remains unchanged unless other transactions require title modification.
Important Points to Note
- Retention claims can be made by creditors of a second mortgage to secure advancement to a higher rank.
- The process of a mortgage assignment can take 2-4 weeks.
- The costs of transferring a land charge, for a land charge of over 200,000 €, are around 500 € in transfer costs.
- Transferring a land charge is significantly cheaper than deleting an old land charge and ordering a new one, which costs around 1,500 € for notary and land register.
- The old land charge can be used as security for a new loan with another bank.
- The transfer of a land charge involves the old and new banks agreeing to the transfer.
- A one-time revaluation declaration may be required by creditors of a second mortgage to prevent the higher-ranking mortgage from being re-registered.
- The old bank must declare that it agrees to the transfer, and the new bank that it takes over the land charge.
- A partial assignment of a mortgage is possible, but it is more expensive than assigning the entire mortgage.
In a refinancing within a financial group, such as Sparkasse with LBS, Volks- and Raiffeisenbanks with the Schwäbisch Hall building society, the banks manage the mortgage trustee among themselves, eliminating the need for mortgage assignment costs.
Overall, transferring a land charge during mortgage refinancing is a crucial step that ensures the new lender has security over your property. It's a process that, when understood, can help you navigate the world of refinancing with confidence.
[1] Transferring a Land Charge During Mortgage Refinancing [2] Understanding the Process of Mortgage Refinancing [3] The Costs of Transferring a Land Charge [4] Mortgage Assignment Explained [5] Title Modification in Mortgage Refinancing
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